No Fooling: U.S. Now Has Highest Corporate Tax Rate in the World

This April Fool’s Day, the joke is on all of us. That’s because as of April 1, the U.S. now has the highest corporate tax rate in the developed world.

Our high corporate tax rate has long made the U.S. an uncompetitive place for new investment. This has driven new jobs to other, more competitive nations and meant fewer jobs and lower wages for all Americans.

Other developed nations have been cutting their rates for over 20 years. The U.S. did nothing.

The U.S. was at least able to stay out of the top spot until now, because Japan had also failed to get its corporate tax rate in line with other more competitive nations. But Japan has finally seen the light and reduced its rate as of April 1.

Japan’s rate was 39.5 percent. That was just barely ahead of the U.S. rate of 39.2 percent (this includes the 35 percent federal rate plus the average rate the states add on). Japan’s rate now stands at 36.8 percent after its recent cut.

The U.S. rate is well above the 25 percent average of other developed nations in the Organization for Economic Cooperation and Development (OECD). In fact, the U.S. rate is almost 15 percentage points higher than the OECD average.

This gaping disparity means every other country that we compete with for new investment is better situated to land that new investment and the jobs that come with it, because the after-tax return from that investment promises to be higher in those lower-taxed nations.

Our high rate also makes our businesses prime targets for takeovers by businesses headquartered in foreign countries, because their worldwide profits are no longer subject to the highest-in-the-world U.S. corporate tax rate. Until Congress cuts the rate, more and more iconic U.S. businesses such as Anheuser-Busch (which was bought by its Belgian competitor InBev in 2008) will be bought by their foreign competitors.

The United Kingdom, for instance, is in as perilous fiscal situation as the U.S. However, the U.K. reduced its rate in 2011 from 28 percent to 26 percent. Chancellor of the Exchequer George Osborne recently announced that the U.K. would further cut its rate to 22 percent by 2014 to increase competitiveness.

Congress needs to cut the corporate tax rate to make the U.S. a more hospitable place for investment. The time for excuses is over. Until it does, every day will be a cruel joke.

Curtis S. Dubay, a leading expert on tax reform, income tax, corporate tax, international taxes, and the estate tax, is a research fellow in tax and economic policy at The Heritage Foundation. Read his research.

corporate income either goes to individuals, who pay the taxes, or investment which leads to job growth. No one is suggesting corporations shouldn't pay a cent, but they should pay competitive rates to stimulate the economy

Economic illiterates shouldn't be opining on that which they know not.

A fundamental tenet of economics is that corporations, if they want to be profitable, must recover all of their costs. Therefore those costs are passed on to the customer. The government can afford to be unprofitable since it has the ability to print money. You run a deficit in the private sector and your business will fail.

By the way, make sure all of your 401K is only invested in nonprofits, Dennis and not in any evil corporations.

which clearly indicates dysfunctional, disorganized, incompetent, undisciplined unethical transformation of America's "change" in government leadership to destroy a free country, doing everything possible to bring her down the gutless way! No accountability, no rules, no ethics, absolutely no common decency, placing disadvantages needlessly on people across the country and, bringing down corporations his government policies set up for the fall!

Mr. Dubay: Buffett argues that it's a myth that corporations pay 35% because they don't pay it. Effective tax rates, that means the taxes actually paid by corporations to the federal gov't, are at historic lows. http://thinkprogress.org/economy/2012/02/27/43274…

The corporate tax rate in the US would appear to be unrelated to the real taxes (if any) paid by most large US corporations. It would help this discussion to point out the median tax rate in reality enjoyed by the big players in the game of tax avoidance and corporate welfare.

Why don't you mention the deductions, credits, write-offs and other loopholes and taxbreaks that result in many (or most) U.S. corporations paying little or no corporate income tax? In the OECD, corporations actually pay the stated rate.

QUOTE "Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008." /QUOTEhttp://online.wsj.com/article/SB10001424052970204…

First off NOVAKHD, corporations don't pay taxes, people do. Instead of thinking independent corporations are getting such a tremendous deal with less tax burden imposed by government is cheating America, why don't you look at the employees? see if the "loopholes or tux cuts" corporations receive allow increase in wages and or benefits for their employees? My husband hasn't had a raise in so many years I've lost track because the hardship is a tremendous weight with EVERYTHING else raised in price all because of the unconstitutional controls of government.. It's not the corporation, it's government intervention!

Your figures come from a theoretical tax that our tax code presents. What you ignore are the loopholes, credits, deductions, and the overseas tax havens that have turn corporations into welfare recipients. They not only pay nothing, American workers are taxed and our government writes these corporations a check with it.
A significant percentage of the 500 Fortune companies pay NEGATIVE taxes while a higher percentage pays less than 1%.

According to the CBO, the effective tax rate (taxes actually paid) in fiscal year to the end of September was an average of 12.1%. The corporate taxes as a percentage of GDP were 1.2%.

It’s also worth noting that U.S. corporate taxes that this 12.1% actually paid fell to a 40 year low while corporate profits were at a 60 year high. Yet, they are not hiring and wages and benefits are down, proving that the GOP trickle down theory does not, nor has it ever, worked.

There’s no incentive for them to reinvest as they are not paying taxes anyway. There’s no longer a need for tax write offs as they no longer pay taxes anyway. This is ultimately achieving a Plutocracy and Social Darwinism that was surely the original intent, while misleading blogs as this distort, manipulate, and lie about the data in order to create a spin to support that agenda.

yes, we do have the highest rate, but not the highest effective rate. Many companies pay no tax at all after all the subsidies and loop holes. Although our total effective rate is above the average, it is lower than many other countries, and is paid on the backs of the smaller companies. A two tier flat tax rate 15% for small business and a 25% for big business, no loopholes no subsidies, that would keep us competitive, and spur economic growth.

Here's a great video that takes what Curtis has written and puts it in visual form and makes it understandable for the average reader/viewer. The numbers are now a bit outdated but the concept is the same: http://youtu.be/fj10f7v1xaU

You know, this would be great if it were true, but its not… Australia's corporate tax rate sits at 30%. Although the standard tax rate is 0-38% in the US, tax incentives and deductions drive that figure down to around 12%, so in terms of "tangible" taxes paid, the average rate in the US is 12% which is one of the lowest in the world. The average "tangible taxes" paid by Australian corporations sits at around 26%(http://www2.accaglobal.com/pubs/australia/general/research/archive/ACCACorpTaxReport02MR.pdf)
which is more than double the tangible US corporate tax rate. I suggest researching a bit before making broad and sweeping claims, otherwise you risk becoming nothing more than a modern Sophist spouting rhetoric.

Look at Switzerland-they were doing terrible until they slashed there corporate tax rate and look at them now.Unemployment at 4%,everyone is moving there from Facebook to Google …It is BOOM town there.
The USA is lucky to have a state like Texas with no state income tax and is very business friendly.If it wasn’t for Texas so many more companies would be overseas already.More and more businesses that want to stay in the USA move there company to Texas.The US is so over taxed there is hardly anywhere for businesses to go.It is to hard to compete globally if you are located here.
Half of all jobs created this year in the entire US originate from Texas.
It just proves keep your taxes low and everyone prospers!
The math is so simple but not everyone gets it?

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